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China inflation eases in August

September 9, 2011 |  6:10 am

China’s inflation eased in August from a three-year high, giving central leaders much-needed breathing room in the face of a worsening global economy.

The National Bureau of Statistics said Friday the country’s consumer price index rose 6.2% from a year ago -– down from 6.5% in July, which was a 37-month high.

Though inflation remains well above a 4% annual target, analysts say the problem may have peaked, diminishing the need for the government to employ tightening measures.

China’s leaders will need fiscal flexibility if a major financial downturn ripples across the globe.

“Although we have entered a period of structurally higher inflation, the moderation in the CPI reading is encouraging and could give the government more policy leeway at a time when market concerns have shifted towards the potential for slower growth in the global economy,” said Jing Ulrich, J.P. Morgan’s chairman of global markets for China.

Falling food prices were largely responsible for tempering inflation last month, rising 13.4% from a year ago compared to 14.8% in July.

But non-food inflation rose 3% from a year earlier, slightly up from July’s reading of 2.9%.

“China’s inflation is down but not out,” said Alistair Thornton, an economist for IHS Global Insight. “The moderation in inflation is not broad-based.”

-- David Pierson

Photo: Customers look at prices for vegetables at a supermarket in Hefei, China. Credit: Reuters